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Tuesday, 03 November 15
THE DISCHARGE OF CARGO IN THE PRC WITHOUT ORIGINAL BILLS OF LADING - CLYDE&CO
 KNOWLEDGE TO ELEVATE
On occasions, a vessel may arrive at a port and be ready to discharge but the original bills of lading in respect of the cargo have not passed through the banking chain to the ultimate receivers, cargo is then discharged against a letter of indemnity (“LOI”) and released to a party who has not paid for the goods, resulting in a claim against the carrier for mis-delivery and, ultimately, a call under the LOI. This scenario is becoming increasingly common in the PRC, particularly in the iron ore trade where banks are looking to enforce their rights in view of the deteriorating financial health of local steel mills and traders. This article highlights the key risks and considers ways in which a party can minimise their potential exposure.
Carriers often come under pressure to deliver cargo without production of the original bills. In light of the potential liabilities, no prudent carrier would agree to delivering cargo without the original bills until they had received an LOI from a party who is financially reliable. Often the carrier will not accept an LOI from the end receiver, who they have had no previous dealings with, and will demand one from its direct contractual counterparty, the charterer. The charterer will in turn want an LOI from the sub-charterer, if there is a charter chain, who may look to its buyer under the cargo sale contract and so on down the chain to the ultimate receiver.
Often the charterer, as shipper the goods, has received payment and, in order to facilitate the discharge of cargo without delay and to avoid a demurrage claim, may issue an LOI without a full appreciation of the risks involved.
There is always a risk of the LOI being called upon. This can happen in circumstances where the bills of lading do not make their way through the chain to the receiver to whom delivery of the cargo has been facilitated by the LOI. The bank, which has paid the seller under the letter of credit, may not have received payment from its customer and therefore retains the bills of lading. The bank then demands delivery of the cargo which has already been delivered (to the party named in the LOI, often the bank’s customer). The bank may have a claim against its customer, but the easier target is a claim against the carrier for mis-delivery. The carrier then inevitably makes a call under the LOI.
Clearly the safest option is for a party to refuse to issue an LOI. However, it not be commercially viable to suggest that LOIs should be avoided at all costs.
If a party is considering providing an LOI, careful scrutiny of the security for payment under the sale contract and of the risk of the bills of lading being stuck in the chain should be conducted first. If practicable, the internal authority for the issuance of LOIs should be reserved to senior staff in the credit or finance functions of the business as the provision of an LOI re-opens the counterparty risk.
The vast majority of LOIs are issued on the International Group of P&I Clubs standard wording and there is often very little, if any, scope for seeking to negotiate this wording. However, if possible, a party should try to limit its liability under the LOI to be issued with regard to amount and duration.
If a party issues an LOI then it should always obtain an LOI from its charterer/buyer down the chain. The indemnity should be on materially identical terms to the LOI provided (subject to any limits included). Parties should always remember that security is only as sound as the solvency of the party providing it and so the indemnity should be backed by a guarantee from a first class international bank or, at the very least, a parent company of substance.
It is important to consider the enforceability of the indemnity and the appropriate law and jurisdiction clause and whether the LOI would need to be registered.
At ports in the PRC, cargoes are often discharged from vessels to customs controlled warehouses or holding areas pending collection by the cargo owner. Effective control over the cargo is often difficult to monitor following discharge. Bills of lading are often exchanged for delivery orders issued by the carrier's agent which can be used to collect the cargo. If the bills have not arrived, the delivery order is often given to the receiver named in the LOI without due consideration as to whether they are entitled to the delivery order and the cargo released against presentation of it.
In the PRC, it is this lack of physical control of the cargo that is leading to the exposures/losses. Parties should try to insert provisions into its contracts which ensure that delivery orders are only exchanged in return for original bills of lading and find ways of asserting greater control over local agents. Charterers should also instruct the vessel to retain the delivery order until the original bills of lading are presented and insist that the carrier's and receiver's agents are different entities.
Another option which should be explored is increasing the usage of independently owned or leased warehouses or bonded warehouses into which cargo can be discharged. Whether this is viable would largely depend on the facilities at the relevant port and the point at which import duty will become payable.
Written by Gerald Yee, Leon Alexander and Kate Docton | Clyde&Co
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Tuesday, 24 November 15
COAL PRICES SET TO REMAIN UNDER PRESSURE UNTIL 2016 DUE TO OVER SUPPLY GLUT; H1 '16 COAL SWAPS DOWN 13% M-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $5 per ton (12.05%) month over month to US$ 36.50 per ton. The s ...
Monday, 23 November 15
NEGATIVE 2016 OUTLOOK FOR WESTERN EUROPEAN STEEL - SAYS FITCH RATINGS
COALspot.com: European steel in 2016 are both negative for the sector and for issuer ratings.
This reflects our expectation that import levels ...
Monday, 23 November 15
DRY BULK MARKET: NET FLEET GROWTH IS SLOWING DOWN, AS SHIP OWNERS ARE LOOKING FOR WAYS TO ALLEVIATING MARKET MELTDOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been in “meltdown” mode for a few weeks now, unable to find support and avoid the fall in historical lows. As s ...
Monday, 23 November 15
CS50 COAL INDEX CLOSED AT $40.27 PER TON; FELL 0.15% FROM LAST WEEK
COALspot.com: The 5700 GAR CS (i) coal index fell by US cents 3 per ton week over week on 20 November 2015. CS 57 (5700 GAR coal) index closed at U ...
Monday, 23 November 15
CFR SOUTH CHINA COAL SWAPS FALL FURTHER ON LOW DEMAND
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 6.75 (13.99%) per ton month over month.
A commodity swa ...
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Showing 2696 to 2700 news of total 6871 |
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- Lanco Infratech Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- European Bulk Services B.V. - Netherlands
- Formosa Plastics Group - Taiwan
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- Wilmar Investment Holdings
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Mjunction Services Limited - India
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Star Paper Mills Limited - India
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- Orica Australia Pty. Ltd.
- Australian Coal Association
- Alfred C Toepfer International GmbH - Germany
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Georgia Ports Authority, United States
- Directorate General of MIneral and Coal - Indonesia
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Deloitte Consulting - India
- Makarim & Taira - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Sinarmas Energy and Mining - Indonesia
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Wood Mackenzie - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Sojitz Corporation - Japan
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Riau Bara Harum - Indonesia
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Metalloyd Limited - United Kingdom
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Asmin Koalindo Tuhup - Indonesia
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Borneo Indobara - Indonesia
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Jindal Steel & Power Ltd - India
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- SMG Consultants - Indonesia
- ICICI Bank Limited - India
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- Marubeni Corporation - India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement - Thailand
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
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